Mortgage Payoff Loses Luster

Last week, The Wall Street Journal ran an article about personal finances that greater Cincinnati mortgage payers who are at or near retirement age should find thought-provoking. It centered on the idea that today’s retirees are often making a decision that differs from what past generations have chosen.

The basis is twofold. First, it’s undeniable that the 60- or 65-year-olds of today rightly expect a future that’s likely to stretch one or more decades longer than was the case for their grandparents. Improved health care and health awareness have combined to extend life expectancies considerably. The WSJ didn’t mention it, but some quick research reveals that while a baby boomer’s parents (assuming they were born in the 1920s) had a longevity expectation at birth of only about 55 years, the CDC says that today’s average 65-year-old male can expect to live another 18 years—with ladies even out-surviving them by another 2½ years.

Such a radical advance combines with a second development—today’s low mortgage interest rates—to create a shift in thinking by many as they hit retirement age. Experts believe that previous generations tended to feel “they were in the last inning” of life, and thus needed to pick a safe path regarding their residences. Paying off their home’s mortgage was given very high priority—one that was almost universally unquestioned. Home ownership unencumbered by a mortgage was taken to be a sound part of a worry-free old age.

But today’s local retirees are significantly less defensive in their thinking. According to The Journal, “Maybe their parents paid off the house before retiring, but many baby boomers say it makes more sense to carry a mortgage.” Instead of surrendering their cash or investments, the 21^st Century trend is for mature Americans to take advantage of today’s low interest rates. The long time run-up in the stock market has also made the choice that much more appealing.

Local retirees may also be departing from the way previous generations behaved. A Merrill Lynch/Age Wave study found that 30% of relocating retirees were moving to larger homes! And let’s face it: the whole notion of retiring is undergoing a transformation as more and more of the 60+ set realize they don’t want (or can’t afford) to quit working altogether. With so many good years before them, many are embarking on new careers—often elatedly following pursuits they’d “never had time for.”

With mortgage rates continuing to roost down in the bargain basement, today’s seniors aren’t alone in recognizing that 2015 represents a rare home buying opportunity. If you are coming to the same conclusion, I hope you will give me a call to chat about buying or selling a home.   

Buying a Home in the Right Homeowners Association

     It does seem that whenever a story about some faraway homeowners association finds its way into greater Cincinnati newspapers, nearly always it’s because something has gone awry. Either there’s an ongoing dispute about a flag display (“Indiana Couple Violate Rules for Flying U.S. Flag”), a fencing disagreement (“Border Feud is Childish and Dangerous”), or something else to catch readers’ eyes. The pettier, the better (“North Carolina Man in Dispute over Pansies Planted in Common Area”). Why does this hit the local news? Let’s face it: it is sort of fun to read about!

     The downside is that when those instances are all we hear about, it can lead local buyers to believe they should stay away from properties with HOAs when they are buying a home. But the fact is, town homeowners associations exist to protect the common interests of owners and residents. Homeowners associations can and do offer many benefits. The key is understanding what they are, what the costs are—then choosing the right association.

Know the Rules

     The first step in evaluating any local homeowners association is to thoroughly examine a current copy of its rules. When you realize that it’s natural to focus on the individual property instead of the community, it’s more understandable why many prospective buyers pay too little attention to this step. Later, they may find themselves in violation of rules they should have noted before. Those stories about flags are typical: usually the problem was not with the flag, but with rules about flagpoles. Small details can become big problems when the homeowners association ‘covenants, conditions and restrictions’ remain unread in a kitchen drawer.

Comparing Costs and Amenities

     In addition to the rules of a contending local homeowners association, there is the matter of its fee structure. Older homeowners associations are often (not always) less expensive than newer HOAs. Yet price is not the whole picture. Especially when evaluating two or more associations, it’s time to sharpen a pencil and compare what the fees cover. One association may include lawn maintenance, while another leaves that as your responsibility…and there may be value for the community (and your property’s resale value) in guaranteeing proper maintenance by everyone. One HOA may have a pool, tennis courts and other amenities, while another may only offer a community room. Newer greater Cincinnati homeowner associations are tending to offer more features, but not always.   
    Homeowners associations offer a sense of community along with amenities and other benefits…but for some, the cost in individuality weighs against it. When I’m invited to be your real estate representative, I help you ask the right questions—the ones that will guide you to a new home that’s the right fit for your family. I hope you’ll give me a call!